With a forward dividend yield of only 0.8% currently, income-oriented investors may completely overlook Canada-based gas station and convenience store operator Alimentation Couche-Tard Inc. (TSX:ATD.B).
After the company cut its dividend in half during the onset of the coronavirus pandemic, some income-oriented investors pushed this pick aside in favour of other dividend growers. That said, I view that cut at the time as a prudent decision by the company’s management team to ensure enough capital was available to handle the uncertainty which was to come.
When some foresight to the end of this pandemic came, the company raised its dividend distribution substantially. The company’s current distribution is still 30% below last year’s distribution level, but Couche-Tard’s management team has raised its distribution as of this last earnings report, a sign that earnings growth is expected moving forward.
Additionally, the company’s rock bottom payout ratio of approximately 8% indicates there is substantial room for dividend increases on the horizon. Barring any unexpected catastrophe in the future, I expect the company will continue on its aggressive double-digit annual dividend increase schedule, and investors will discover the value that dividend growth has from a compounding perspective.
For now, investors ought to consider the value this dividend payer has from a growth perspective. The company has a number of attractive acquisition opportunities to consider, in addition to same store sales growth which has remained strong. There are few Canadian companies out there with the growth potential (earnings and dividends) that Couche-Tard provides today.
Invest wisely, my friends.
